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LABORATORY   MANUAL 


COST  ACCOUNTING 


1921  EDITION 


:••..».....• 


Fayette  H.  Elwell  B.  A.,  C.  P.  A. 

PROFESSOR  OF  ACCOUNTING 
THE  I INIVERSITY  OF  WISCONSIN 


>- 


Digitized  by  the  Internet  Archive 

in  2007  with  funding  from 

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http://www.archive.org/details/costaccountingOOelwerich 


LABORATORY  MANUAL 


COST  ACCOUNTING 


1921  EDITION 


•  •.  /  •• 
••%  V  .•• 
:  !:»•!•:. : 

:••  A  ••: 

•  ••*  V.   • 


Fayette  H.  Elwell  B.  A.,  C.  P.  A. 

PROFESSok  OF  ACCOUNTING 
THE  UNIVERSITY  OF  WISCONSIN 


COPYRIGHT,  1921 

By 

FAYETTE  H.  ELWELL 


The  Pabker  Company 
Madison,  Wisconsin 


PREFACE 

From  the  problems  presented  in  this  set  are 
selected  those  which  comprise  the  laboratory  prob- 
lem work  'for  the  course  in  cost  accounting  given  in 
the  Course  in  Commerce,  University  of  Wisconsin. 
This  set  supplements  the  laboratory  material  con- 
tained in  the  texts  and  assigned  readings. 

As  indicated,  many  of  these  questions  have  been 

selected   from   certified    public    accountant  examina- 
tions. 

R  H.IElwell 


Madison,  Wisconsin 
September  15,  1921 


453245 


PROBLEM  1 

(Wisconsin,  1916) 

(a)  Give  a  definition  of  a  "unit"  in  cost  accounting,  and  briefly  explain 
its  use. 

(b)  What  cost  unit  would  you  recommend  for  the  following  industries : 

1.  Gas  Plants  11.  Water  Works 

2.  Electric  Lighting  Utility-'  12.  State  Prison                     ..;^. ,^  — 

3.  Brewery    -    /"'  13.  Tanneries                         .., 

4.  Coal  Mine     "     '  -  14.  Flour  Mills 

5.  Passenger  Railroad   -   ^/» "    ■    - ' '  15.  Knitting  Mills 

6.  Street  Railway  <"'  -^  16.  Creameries 

7.  Paper  Mill  17.  Quarries 

8.  Printing  Plant  18.  Cement  Mills 

9.  Brick  Yard  19.  Blast  Furnace 
10.  Canning  Factory  20.  Foundries 

PROBLEM  2 

It  has  been  determined  that  the  yearly  normal  capacity  of  a  plant  as 
regards  its  productive  labor  is  one  hundred  men  working  for  three  hundred 
days,  and  that  the  amount  of  trading  expenses  for  one  year  is  $30,000. 

We  are  asked  to  make  a  quotation  on  one  hundred  tons  of  iron,  on  which 
we  wish  to  realize  a  net  profit  of  $10  a  ton.  Our  estimates  for  costs  entering 
into  the  product  are  as  follows :  90  tons  pig  iron  at  $20.00  a  ton.  10  tons 
scrap  iron  at  $10  a  ton.  Coal,  50  tons,  at  $3.00  a  ton.  Sundry  supplies  at 
$5.00  per  ton,  of  product.  The  productive  labor  will  be  $15.00  a  ton.  The 
non-productive  labor  will  be  20%  on  productive  wages.  Factory  expenses 
(including  maintenance,  depreciation,  etc.)  will  be  10%  on  productive  wages 
and  the  trading  expenses  are  to  be  based  on  the  daily  output,  which  in  this 
case  is  estimated  at  200  lbs.  per  day,  per  man. 

Show  by  complete  illustration  the  total  cost  of  this  contract,  and  state 
how  much  per  lb.  we  must  quote  to  realize  a  net  profit  of  $10.00  per  ton. 

PROBLEM  3 

(Pennsylvania,  1915) 

Iron  Company  "A"  purchases  on  January  1,  1912,  all  the  outstanding 
capital  stock  of  Iron  Company  "B,"  and  thereby  acquires  among  other  assets 
two  blast  furnace  plants,  viz. :  furnace  No.  1  and  furnace  No.  2. 

Furnace  No.  1,  of  about  100  tons  daily  capacity,  produces  18,000  tons 
from  January  1  to  July  1,  1912,  and  is  blown  out  on  this  latter  date  for  general 
repairs  to  the  blowing  engines.  On  September  1,  1912,  operations  are  resumed 
after  spending  $6,000.  The  furnace  then  produces  40,000  tons  and  is  again 
blown  out  on  October  1,  1913.  This  time  furnace  and  stoves  are  completely 
relined  and,  with  the  entire  power  plant  and  other  equipment  brought  to  full 
efficiency  at  a  cost  of  $40,000,  it  is  expected  that  henceforth  a  provision  of 
20  cents  per  ton  of  pig  iron  produced  will  be  adequate  to  provide  for  future 
relining.    It  is  blown  in  on  January  1,  1914. 

Furnace  No.  2,  of  about  150  tons  daily  capacity,  has  been  newly  con- 


structed.  It  was  b-!o'^^n' iri' "on"  the 'dilte  of  purchase  and  has  produced  to 
December  31,  1913,  110,000  tons  of  iron.  No  more  than  ordinary  wear  and 
tear  is  perceptible,  and  the  furnace  may  run  for  another  year  before  a  general 
relining,  costing  about  $30,000,  is  necessary. 

How  should  the  charges  for  relming  furnace  No.  1  be  disposed  of  and 
what  provision  should  be  made  for  the  future  relining  of  furnace  No.  2  on 
December  31,  1913? 


PROBLEM  4 

(Wisconsin,  1918) 

You  have  been  employed  by  two  baking  companies  of  Superior,  the  A 
Co.  and  the  B  Co.,  to  prepare  a  statement  of  the  costs  of  a  pound  loaf  of 
bread,  and  a  pound  and  a  half  loaf  of  bread  delivered  to  the  dealers.  The 
amount  of  profit  or  loss  per  barrel  and  per  loaf  should  be  obtained.  The 
operating  expenses  for  March  are  to  be  used  in  your  analysis. 

The  pound  loaf  is  sold  to  the  dealer  for  7^c;  the  pound  and  a  half  loaf 
for  lie. 

The  loaves  sold  are  as  follows : 

1  Pound  VA  Pound 

Loaf  Loaf 

A  Company   $  93,000.00  $254,500.00 

B   Company   145,080.00  377,475.00 

A  Company  B  Company 

Materials    Used    23,433.42  32,425.00 

Productive  Labor  2,500.00  4,000.00 

Bakery    Expenses: 

Non-Productive  Labor  500.00  200.00 

Heat,    Light   and    Power    125.00  300.00 

Repairs     375.DO  350.00 

Depreciation     200.00  400.00 

Insurance    200.00  325.00 

Miscellaneous  Supplies  250.00 

Miscellaneous  Bakery  Expense  150.00  100.00 

Delivery  Expenses: 

Agents'  Salaries  and  Expenses   500.00  1,000.00 

Drivers'  Salaries  2,000.00  2,000.00 

Shipping  Department  Expense   400.00  700.00 

Stable  Expense  600.00  1,200.00 

Wagon  and  Harness  Expense  250.00  350.00 

Automobile    Expense 700.00  1,500.00 

Advertising    700,00  1,300.00 

Administrative  Expenses: 

Officers'  Salaries    2,000.00  3,000.00 

Office    Salaries    300.00  600.00 

Office,  Heat,  Light,  etc 50.00  60.00 

Taxes    300.00  500.00 

Depreciation    40.00  50.00 

Stationery  and    Printing    75.00  250.00 

Donations    100.00  75.00 

Postage    25.00  50.00 

Miscellaneous  General  Expense 100.00  125.00 

The  A  Company  further  states  that  they  are  able  to  secure  270  pound 
loaves  from  a  barrel  mix,  and  180  pound  and  a  half  loaves  from  a  barrel  mix. 
The  yield  per  barrel  for  the  B  Company  is  267  pound  loaves  and  175  pound 
and  a  half  loaves. 

In  conversation  with  the  official  of  the  company,  they  advise  you  in  your 


analysis  to  group  the  expenses  under  four  headings ;  materials,  labor,  delivery 
expenses,  and  overhead. 

You  may  employ  such  distribution  of  the  expense  items  as  you  deem 
best  in  view  of  the  data  presented  and  the  nature  of  the  business. 

Prepare  the  report  to  the  two  companies  as  requested,  and  draw  up  a 
summary  schedule  showing  the  comparative  costs,  selling  prices  and  profits 
or  losses  for  both  sizes  of  bread  for  both  companies. 


PROBLEM  5 

A  concern  is  engaged  in  manufacturing  steel  ranges  and  asks  you  to 
decide  the  following  points  relating  to  Range  No.  100 : 

a.  Would  it  be  better  to  continue  producing  the  castings  made  by  process 
A  or  to  buy  them  ? 

b.  The  concern  can  use  for  the  second  process  either  Process  B  or  B-1. 
Which  is  preferable? 

c.  For  the  third  operation,  which  is  preferable,  C  or  C-1? 

d.  Work  out  the  cost  of  each  process  and  the  cost  of  the  finished  article 
according  to  the  best  combination  of  processes. 

In  points  A,  B,  and  C  give  brief  summary  of  all  reasons  which  lead  to 
the  conclusions  given  your  client.  Use  6%  interest  rate  in  all  your  calculations 
involving  interest. 

FOUNDRY  DEPARTMENT 
Process  A 

Labor    $5.50 

Material    8.00 

Other    Expenses    6.00 

Capital  Used,  $7,500—2  days 
Market  Price,  $23.50 

Process  B  Process  B-1 

Labor   $        1.80  $       0.90 

Material 1.50  1.60 

Other  Expenses   3.20  3.50 

Capital   3,000.00  1  %  days       5,400.00  1  day 

Assembling 

Process  C  Process  C-1 

Labor   $      .70  $         .40 

Material   1.30  1.30 

Other   Expenses    1.20  1.46 

Capital   900.00  Vs  day      2,400.00  J4  day 

Sales  Expenses,  $4.25  Selling  Price,  $61.50 

PROBLEM  6 
(lUinois,  1914) 

A  is  the  owner  and  operator  of  a  stone  quarry,  which,  owing  to  weather 
conditions,  cannot  be  operated  between  December  1  and  February  28.  B 
caused  damage  to  the  quarry  which  delayed  the  commencement  of  operations 
until  April  15,  from  which  date  the  quarry  was  worked  until  November 
30th  and  produced  71,000  cu.  yds.  at  a  quarry  cost  of  29c  per  cu.  yd.  The 
product  from  all  sold  at  77c  per  cu.  yd.  Overhead  expense  for  the  year, 
$10,000.  B  repaired  the  quarry  at  his  own  expense.  You  are  required  by  the 
lawyer  for  A  to  indicate  the  measure  of  consequential  damage  as  a  basis 
for  action.    In  your  answer  illustrate  your  method. 


PROBLEM  7 

(New  York,  1915) 

The  Cinema  Company,  leasing  moving  picture  machines  for  theaters, 
has  1,000  machines  in  operation.  On  January  1,  1915,  the  company  decides 
to  increase  the  number  of  its  machines  80%  and  places  an  order  with  the 
manufacturers  of  the  machines,  who  agree  to  complete  and  deliver  the  new 
machines  in  equal  quarterly  installments.  The  company  arranges  to  borrow 
$60,000,  by  the  sale  of  five-year  6%  notes,  it  being  agreed  that  a  sum  equal 
to  20%  of  the  total  issue  shall  be  set  aside  annually  out  of  the  profits  of  the 
company  for  the  redemption  of  such  notes.  The  average  annual  cost  for 
maintenance  was  found  to  be  $120  per  machine,  and  $24,880  was  estimated 
for   other   expenses. 

What  annual  charge  per  machine  would  the  company  have  to  make  in 
order  to  meet  its  obligations  and  pay  a  dividend  of  10%  on  $200,000  of  its 
capital  stock? 


PROBLEM  8 

(North  Carolina,  1919) 

The  product  of  a  garment  factory  consisted  of  only  two  grades  of  gar- 
ments, viz. :  grade  "A"  and  grade  "B." 

There  was  no  difference  in  the  cost  of  materials  and  supplies  consumed 
in  the  two  grades,  but  there  was  a  difference  in  other  manufacturing  expenses 
of  which  it  was  impossible  to  keep  separate  as  to  the  grades.  If  the  factory 
ran  exclusively  on  grade  "A"  the  production  would  amount  to  2,800  garments 
per  week ;  if  it  ran  exclusively  on  grade  "B"  the  weekly  production  would 
amount  to  3,500.  The  factory,  however,  made  both  grades  at  same  time. 
You  were  called  in  at  the  end  of  first  month's  operation  to  audit  the  books 
and  prepare  cost  statement.  Your  cost  statement  showed  that  the  average 
cost  per  garment  was  $6.60,  Excluding  materials  and  supplies  that  cost  $5.00 
per  garment. 

Production  of  grade  "A"  was  8,800,  grade  "B"  3,200.  The  inventory  con- 
sisted of — grade  "A"  1,600  garments,  grade  "B"  400  garments.  Prepare 
statement  showing  the  value  of  the  inventories  for  the  period. 


PROBLEM  9 

([New  York,  1915) 

A  textile  manufacturer  operated  his  mill  during  a  strike  period,  extending 
from  February  4,  1914,  to  July  8,  1914.  The  losses  sustained  by  him  during 
this  period  are  to  be  compensated  for  by  a  manufacturer's  association  and 
the  parties  agree  to  the  following: 

The  mill  has  80  looms,  but  the  percentage  of  loss  is  to  be  based  on  a 
standard  of  60  looms,  and  only  75%  of  the  looms,  which  were  operated,  are 
to  be  considered,  in  the  adjustment  of  the  loss,  as  having  been  in  operation. 
The  remaining  looms  are  the  basis  for  compensation. 

Fixed  charges  were  $29,263  per  annum.  A  further  loss  of  $4,112.45  occurred 
by  reason  of  excess  charges  paid  on  loom  labor  and  there  was  a  loss  of  mate- 
rials from  theft  and  carelessness  of  strike-breakers  amounting  to  $500. 

The  total  productive  loom  hours  accomplished  were  43,064.     The  maxi- 


mum  hours  per  loom  were  1,200.    The  normal  production,  at  mill  cost,  would 
be  $119,203.47.    Five  per  cent  on  actual  loss  of  production  was  also  to  be  paid. 
Prepare  a  statement  showing  what  the  manufacturer  is  entitled  to. 

PROBLEM  10 

(North  Carolina,  1919) 

1.  "A"  purchased  a  manufacturing  business  that  had  an  inventory  of 
finished  product  amounting  to  5,000  pounds.  He  ran  the  plant  one  year  and 
took  inventory  and  found  he  had  8,000  pounds  of  finished  product  on  hand. 
You  were  called  in  to  make  an  audit  of  the  books  and  the  examination  dis- 
closed he  had  sold  20,000  pounds  of  product  and  the  total  cost  of  making 
the  product  amounted  to  $12,800.00.  Prepare  a  statement  showing  the  cost 
per  pound. 

2.  The  product  of  a  Cloth  Mill  consisted  of  three  grades  of  piece  goods, 
designated  as  grades  "A,"  "B,"  and  "C."  The  theoretical  production  per 
week  per  loom  was  as  follows: 

"A"   24.30  pounds 

"B" • 28.60  pounds 

"C"    32.20  pounds 

The  entire  annual  production  of  the  grades  was  as  follows: 

"A"   100,000  pounds 

"B"    •  • 60,000  pounds 

"C"    140,000  pounds 

The  raw  materials  used  cost  an  average  price  of  60  cents  per  pound,  and 
the  total  manufacturing  expenses  amounted  to  $120,000.00.  Prepare  a  state- 
ment showing  the  cost  per  pound  for  each  of  the  three  grades. 

PROBLEM  11 

(Michigan,  1913) 
A  manufacturing  concern  has  been  operating  for  a  period  of  nine  months, 
but  owing  to  incomplete  development  of  the  plant,  the  production  during 
that  period  was  greatly  below  the  capacity  and  the  cost  of  production  con- 
sequently abnormal.  The  directors  are  anxious  to  obtain  a  statement  not 
only  showing  the  result  of  operations  for  the  nine  months,  but  one  which 
would  be  fairly  indicative  of  what  the  results  would  have  been- had  condi- 
tions been  normal.  Assuming  that  the  actual  time  lost  on  account  of  the 
frequent  stoppages  amounted  in  the  aggregate  to  four  months,  would  the 
auditor  be  justified  in  furnishing  the  latter  statement  as  well  as  the  former, 
and  if  so,  how  would  you  proceed  to  show  the  desired  results  from  the  fol- 
lowing items : 

Manufacturing  Materials $39,865.69  Taxes  and  Interest $  1,398.59 

Freight    5,489.22  General  Expenses  6,537.14 

Productive  Wages 8,827.84  Sales 42,363.33 

Non-Productive  Labor 4,441.73  Finished  Goods  at  Cost  7,346.45 

Salaries   6,877.29 

PROBLEM  12 

(Wisconsin,  1916) 

1.  (a)  Discuss  various  methods  of  pricing  commodities  withdrawn  from 
storerooms. 


(b)  Discuss  various  methods  of  evaluating  stores  on  hand. 

(c)  Explain  necessary  adjustments  when  physical  inventories  are  more  or 
less  than  amounts  called  for  by  storeroom  perpetual  inventory  cards. 

(d)  When  factors  should  be  considered  in  determining-  minimum   and 
maximum  quantities  of  raw  materials  to  be  carried  in  stores? 

2.     (a)     Differentiate  between  waste  and  shrinkage  as  found  in  manu- 
facturing plants. 

In  cost  accounting: 

(b)  State  three  methods  of  treating  waste. 

(c)  State  two  methods  of  treating  shrinkage. 

(d)  State  three  methods  of  treating  defective  goods. 

(e)  State  two  methods  of  treating  idle  time. 


PROBLEM  13 

From  the  following  sets  of  figures,  state  exactly  what  reconciliation  should 
be  made  at  the  end  of  each  week  for  each  set,  how  the  various  sets  and 
figures  prove  one  another,  and  also  outline  a  method  for  determining  whether 
any  burden  remains  to  be  distributed  by  the  supplementary  rate.  Your 
answer  must  be  full  and  complete. 

The  productive  labor  charges  on  jobs  for  the  week  are  as  follows : 

Job  76  $121.04 

Job  77  131.03 

Job  78  146.75 

The  production  factor  hours  charged  to  job  are  as  follows: 

Factor  No. 
12  3 

Job  1(>   30  40  SO 

Job  n   80  50         50 

Job  78   90        110        100 


PROBLEM  14 

(Wisconsin,  1918) 

From  such  facts  as  are  submitted  by  the  Cool  Coal  Co.  you  are  requested 
to  distribute  the  indirect  yard  and  office  expenses  in  an  equitable  manner 
between  the  wholesale  and  the  retail  sales  of  hard  coal  and  soft  coal.  State 
your  reason  for  using  the  method  you  employ. 

The  indirect  yard  and  office  expenses  amount  to  $35,000. 

The  tonnage  handled  is  as  follows : 

Wholesale  Retail  Total 

Hard    Coal    2,500  10,000  12,500 

Soft  Coal  45,000  16,000  61,000 


47,500        26,000        73,500 

The  income  from  sales  and  the  resulting  gross  profits  are  as  follows: 

Wholesale  Retail 

Sales  Price        Gross  Profit  Sales  Price       Gross  Profit 

Hard   Coal    $21,250.00          $1,000.00  $105,000.00          $18,500.00 

Soft  Coal    168,750.00            13,000.00  88,000.00           35,000.00 


$190,000.00  $14,000.00  $193,000.00         $53,500.00 

10 


PROBLEM  15 

1.  From  the  following  facts  taken  from  the  books  at  the  end  of  a  month, 
select  such  figures  as  may  be  necessary  to  properly  construct  the  Manufactur- 
ing Expense  and  Factory  Expense  accounts.  Build  up  these  accounts,  show- 
ing the  details  of  the  debits  and  credits  of  each,  the  balances,  etc. 

The  general  and  administrative  expense  was  $200,  of  which  $50  was  in- 
curred by  time  of  officers  given  over  to  the  factory.  The  total  of  the  Voucher 
Payable  Register  column  "Factory  Expense"  is  $486.26.  Taxes,  depreciation, 
rent,  and  insurance  actually  chargeable  to  the  period  total  $208.82.  The  mate- 
rials in  process  at  the  end  of  the  month  total  $1,468.15.  $21.00  of  the  accrued 
pay  roll  at  the  end  of  the  month  is  chargeable  to  factory  expense.  The  esti- 
mated expenses  of  the  factory  for  the  month  amount  to  $554.92.  The  footings 
of  the  finished  goods  journal  for  the  month  are  as  follows :  Finished  goods, 
debit  $3,413.91 ;  materials  in  process,  credit  $2,406.85 ;  productive  labor, 
credit  $457.53 ;  manufacturing  expense,  credit  $549.53.  The  finished  goods 
account  stands  debited  at  the  end  of  the  month,  $330.86.  The  productive 
labor  stands  debited  with  $216.46.  The  job  numbers  50,  51,  and  52  are  in 
process  through  the  factory  and  are  to  date  charged  with  $250.61  of  manu- 
facturing expense.  The  debit  balance  to  manufacturing  expense  brought 
forward  from  a  previous  period  amounted  to  $195.48.  The  accrued  interest 
on  notes  payable  totals  $3.07. 

2.  The  total  estimated  manufacturing  expenses  for  a  year  amount  to 
$6,000.  The  charges  to  Factory  Expense  for  October  amount  to  $600.  Manu- 
facturing expenses  to  the  amount  of  $470  have  been  taken  up  in  finished 
goods  during  the  month.  Set  up  accounts  for  Manufacturing  Expenses  and 
Factory  Expenses  and  make  entries  to  give  effect  to  above  facts.  Explain 
meanings  of  balances. 

PROBLEM  16 

A  certain  factory  employs  259  men.  The  total  number  of  direct  labor 
hours  for  the  month  of  April  is  48,000  hours  and  the  amount  of  wages  is 
$16,000.     The  total  burden  for  the  month  amounts  to  $12,000. 

Job  No.  45  is  the  construction  of  a  heavy  machine.  The  direct  labor  spent 
on  it  amounted  to  3,000  hours  with  a  direct  wage  of  $950.  The  material 
entering  into  the  machine  cost  $1,128. 

What  will  be  the  total  factory  cost  of  the  job,  according  to : 

(a)  The  hourly  burden  plan? 

(b)  The  percentage  of  wages  plan? 

(c)  Suppose  the  job  required  the  use  of  three  machines  on  which  the 
rates  are  as  follows : 

A— 1,000    hours,    rate $0,124  per  hour 

B—   400    hours,    rate 152  per  hour 

C— 1,200    hours,    rate .210  per  hour 

What  would  be  the  total  factory  cost,  according  to  this  plan? 

(d)  What  possible  conditions  in  the  shop  would  account  for  these 
differences  ? 

PROBLEM  17 

(Wisconsin,  1916) 

(a)  From  the  following  data,  explain  and  illustrate  four  methods  of 
distributing  the  indirect  expenses  of  a  factory  to  production : 

Items  Dept.  A      Dept.  B      Dept.  C 

Materials  Used  $10,000        $5,000        $5,000 

Productive  Wages  Paid 3,200         2,500  3,500 

11 


Productive  Labor  Hours   8,000  5,000  10,000 

Indirect  Expenses  4,000  2,500  2.800 

The  factory  is  supposed  to  -run  2,400  hours  a  year. 

(b)  Apply  the  results  obtained  in  (a)  to  the  facts  given  below  for  Job  No. 
10,  in  order  to  show  the  different  total  job  costs  obtained  by  each  of  the 
methods.  Assume  the  material  and  labof  (value  and  time)  chargeable  to  Job 
No.  10,  to  be  as  follows : 

Item  Dept.  A    Dept.  B    Dept.  C     Total 

Material  . . . ." $1.00        $2.00        $1.00        $4.00 

Labor   Value    1.60  1.50  1.05  4.15 

Labor  Hours   4  3  3  10 

PROBLEM  18 

(New  York,  1916) 

The  Treasurer  of  the  United  Manufacturing  Company  submitted  the 
following  figures,  taken  from  the  ledger  of  the  company,  as  representing  the 
condition  of  the  business,  December  31,  1915: 

Cash    $    7,500 

Accounts  Receivable 45,000 

Notes  Receivable 1,875 

Inventory: 

Raw    Materials    $20,000 

Labor 30,000 

Manufactured  Goods 16,250 

66,250 

Accounts  Payable $    5,875 

Notes  Payable   20,000 

Capital  Stock  80,000 

Surplus,  December  31,  1915 14,750 

$120,625        $120,625 

A  comparison  of  the  above  statement  with  a  former  one  showed  a  net 
loss,  for  the  period,  of  $6,250.  The  directors  had  expected  a  profit,  basing 
tfieir  expectations  on  the  result  obtained  by  applying  their  cost  calculations 
to  the  volume  of  sales  for  the  period,  and  they  employed  an  accountant  to 
investigate  the  matter.  All  the  Nominal  Accounts  had  been  closed  into  either 
the  Merchandise  Account  or  the  Profit  and  Loss  Account,  and  an  analysis  of 
these  accounts  disclosed  the  following: 
Inventory  at  Beginning  of  Period: 

Raw  Material $  22,500 

Labor 32,500 

Manufactured  Goods    55,000 

Purchases  During  Period 50,000 

Labor 87,500 

Wages     10,000 

Traveling  Expenses,   Commission,   etc 26,250 

Salaries   19,000 

Rent 3,750 

Bad  Debts  6,375 

Depreciation    1 ,500 

Interest  625 

Sales      250,000 

Return  Sales  7,500 

The  consumption  of  material  and  labor  shown  by  the  cost  records  was: 

Material $45,000 

Labor 80,000 

Prepare  a  statement  showing  any  discrepancy  that  may  exist  in  the  above 
figures;  also  a  statement  of  assets  and  liabilities,  December  31,  1915. 

12 


PROBLEM  19 

(Institute  Examination,  November,  1918) 
The  following  problem  is  based  upon  the  estimate  cost  system.  No  factory 
ledger  will  be  used,  all  accounts  being  kept  on  the  general  ledger.  The 
business  is  the  making  of  men's  clothes,  and  two  principal  materials  will  be 
used,  fine  woolens  and  plain  woolens,  of  which  stock  records  will  be  kept. 
Stock  records  will  also  be  kept  for  finished  goods. 

(a)  The  following  styles  of  clothing  will  be  made,  and  they  are  estimated 
to  cost: 

Style  801  Style  802  Style  803 

Material  Used    $12.50  $  8.00        $  4.00 

Supplies  (Linings,  Buttons,  etc) 3.00  2.50            2.00 

Labor 9.00  6.00            4.50 

Factory  Expenses,  60% 5.40  3.60            2.70 

$29.90        $20.10        $13.20 

Note  that  the  estimated  costs  are  subdivided  into  four  sections,  and  that 
the  accounts  must  be  kept  to  record  the  corresponding  subdivisions  of 
operating  costs. 

(b)  The  company  starts  with  the  following: 

Dr.  Cr. 

Machinery  and  Equipment $10,000 

Cash  40,000 

Capital    Stock    $50,000 

(c)  The  purchases  for  the  first  month,  according  to  voucher  records,  are: 

Materials,  Fine  Woolens,  2,000  yards  at  $3.00 $  6,000 

Materials,  Fine  Woolens,  3,000  yards  at  $1.50 4.500 

Rent    of    Factory    500 

Lining,  Buttons,  and  Thread,  etc 3,400 

Salesmen's  Commissions  Paid 700 

Office  Expenses   120 

Repairs   to   Machines   and    Equipment 350 

Electric  Power  440 

Oil,  Waste,  and  Other  Factory  Supplies 225 

$16,235 

(d)  The  pay  rolls  are  summarized  as  follows : 

Foreman  and  Timekeepers $   250 

Tailors,  Cutters,  etc.  (Direct  Labor) 4,6(X) 

Office  and   Salesmen's   Salaries 750 

Inspectors  and  Other  Indirect  Factory  Wages 435 

$6,035 

(e)  Depreciation  on  equipment  is  calculated  at  1%  per  month. 

(f)  The  cutting  room  foreman  reports  materials  for  use  on  garments  in 
progress. 

1,400  Yards  Fine    Woolens 
2,200  Yards  Plain  Woolens 

(g)  The  tailoring  foreman  reports  the  following  garments  finished  and 
placed  in  stock : 

Style  No.  801 200  pieces 

Style  No.  802 300  pieces 

Style  No.  803 200  pieces 

(h)  The  sales  record  is  as  follows : 

Invoice  No.  1,  Style  No.  801,  100  Pieces $  4,000 

Invoice  No.  2,  Style  No.  801,    50  Pieces 2,050 

Invoice  No.  1,  Style  No.  803,  100  Pieces 2,000 

13 


Invoice  No.  3,  Style  No.  802,  100  Pieces 3,000 

Invoice  No.  4,  Style  No.  802,  100  Pieces 2,800 

Invoice  No.  4,  Style  No.  803,    25  Pieces 450 

$14,300 
(i)    Hint :    Make  entry  for  cost  of  sales, 
(j)    Received  cash  from  customers,  $9,000. 
(k)   Paid  out  cash  for  wages,  $6,035,  and  vouchers,  $7,650. 
(1)    Inventories  at  end  of  month.     (In  addition  to  stock  of  raw  materials 
and  finished  goods  as  shown  by  stock  records.) 
Supplies,  $1,000. 
Unfinished  Goods : 
Style  No.  801,  50  Pieces. 

All  material  cut. 

All  supplies  provided. 

Labor  half  completed. 
Style  No.  802,  100  Pieces. 

All  material  cut. 

Half  of  supplies  provided. 

Half  of  labor  finished, 
(m)   Prepare  balance  sheet  and  profit  and  loss  account  for  the  month. 
Add  or  deduct  from  cost  of  sales,  when  preparing  profit  and  loss  acount, 
the  unabsorbed  labor,  expenses,  etc. 

(n)  Show  how  balances  of  raw  material  and  finished  goods  are  made  up. 

PROBLEM  20 

(Michigan,  1915) 

The  Standard  Overall  Company,  employing  piece-work  operators  and 
estimating  material  consumption  on  the  basis  of  spefications,  has  allowed  its 
cost  system  to  fall  behind  and  employs  y9U  to  pull  the  work  together.  You 
find  that,  starting  the  year,  opening  entries  appear  on  your  ledger  as  follows: 

Finished   Garments    $    11,000 

Work    in    Process 5,000 

Raw  Material    20,000 

Undistributed  Department  Burden 2,500 

Undistributed  General  Factory  Burden 1,000 

Subsequent  Transactions  per  Books: 

Material  Purchased   500,000 

Material  Delivered  to  Cutting-  Room 475,000 

Productive     Labor     (Accrued),     Comprising-    850,000    Productive 

Hours    250,000 

Department  Burden  (Accrued)   100,000 

General    Factory    Burden     (Accrued),    Including    25,(XK)    Hours 

Non-productive  Time   25,000 

Selling  Expenses   150,000 

Administrative    Expenses    80,000 

Garments  Completed,  Delivered  to  Finished  Stock 840,000 

Garments  Sold  Valued  at  Manufacturing-  Cost 900.000 

Sales   (Net) 1,200,000 

Taking  of  Inventory  Necessitated  the  Following  Adjustments: 

Raw   Material    (Short)     3,000 

Work    in    Process    (Over) 5(X) 

Finished  Garments   (Short) 1,5(X) 

Department    Burden    Rate    (Flat) 12  cents  per  hour 

General  Factory  Burden  Rate   (Flat) 3  cents  per  hour 

Raise  the  necessary  ledger  accounts  and  show  Manufacturing,  Trading, 
and  Profit  and  Loss  Statements,  together  with  Trial  Balance  at  close. 

14 


PROBLEM  21 

(Virginia,  1916) 

Prepare  statements  showing  cost  to  produce  and  profit  on  sales  of  a  small 
creamery,  the  books  of  which  show  as  follows : 

January  1,  1915,  butter  on  hand,  1,000  pounds,  valued  at  $350;  gathered 
and  sweet  cream  purchases,  400,000  pounds,  purchased  on  basis  of  butter  fat 
test  at  30c  per  pound  butter  fat;  coloring  matter,  $250;  other  miscellaneous 
manufacturing  supplies,  $175 ;  freight  and  commission  on  purchases,  $325 ; 
labor  cost  for  year,  $9,500;  insurance  and  taxes,  $165.49;  factory  light  and 
power,  $975 ;  depreciation  on  plant,  $685. 

Inventory,  December  31,  1915;  485  pounds  of  butter,  valued  at  cost; 
other  expenses,  such  as  office  salaries,  $5,635.50;  postage,  $175;  repairs  to 
office,  $73.95. 

Sales,  $125,565;  allowances  for  losses  on  shipments  (to  patrons),  $143.75. 

Assume  that  1^4  pounds  cream  tests  1  pound  butter  fat,  and  1  pound  of  fat 
produces  16%%  in  excess  weight  of  fat. 

Show  selling  weight  and  price  per  pound  realized  from  sales. 

PROBLEM  22 

(North  Carolina,  1919) 
The  following  is  a  final  trial  balance  of  a  Rope  Factory,  covering  the  year 
1918,  which  began  business  January  1  of  that  year,  except  the  value  of  the 
inventory  of  the  finished  product  at  the  end  of  year  has  not  been  ascertained 
and  entered  on  the  books : 

Debits        Credits 

Cash     $  100,000 

Accounts   Receivable    275,000 

Cost  of  Plant 300,000 

Office  Expense 8,000 

Labor  and  Maintenance 200,000 

Cost    of    Power 10,000 

Machinery    Royalty    4,000 

Salaries  of  Officers 15,000 

Miscellaneous   Factory   Expense 5,000 

Depreciation  for  Year 15,000 

Miscellaneous  Administrative  Expenses 5,000 

Discounts  Allowed   1,000 

Materials  and  Supplies  Consumed 500,000 

Interest   on   Loans 2,000 

Accounts  Payable   15,000 

Notes  Payable   200,000 

Sales    900,000 

Capital  Stock   200,000 

Reserve  for  Depreciation 100,000 

Discounts  Received 3,000 

Surplus 22,000 

$1,440,000    $1,440,000 

The  total  pounds  of  rope  manufactured  during  the  year  amounted  to 
1,478.000  pounds.  The  inventory  at  end  of  year  amounted  to  200,000  pounds. 
The  market  price  of  rope  at  end  of  year  was  40  cents  per  pound. 

The  corporation  under  T  D  2609  adopted  the  method  of  taking  inventories 
at  cost  or  market  whichever  is  lower. 

(a)  Prepare  a  Profit  and  Loss  Account  showing  the'profits  for  the  year. 

(b)  Prepare  a  Balance  Sheet  of  the  Assets  and  Liabilities. 

15 


PROBLEM  23 

(Pennsylvania,  1904) 
A  Gas  Company  shows  the  following-  trial  balance  at  the  end  of  its  first 
year  of  business : 

Capital  Stock $    500,000 

Bonds  500,000 

Accounts   Payable    48,000 

Gas  Accounts    342,600 

Manufacturing    Labor    $       5,400 

Boiler    Fuel    3,200 

Generator   Fuel    '.  5,400 

.      Oil     126,000 

Purifiers 3,200 

Repairs,  Works  2,600 

Expense,  Works  3,900 

Water 1,500 

Insurance 300 

Taxes    4,800 

Distribution  Labor  and  Material 12,000 

Office    Expense    13,500 

Stable    Expense    4,000 

Repairs,  Mains   1,800 

Repairs,   Meters    600 

Repairs,  Sewers    700 

Street  Lighting  300 

Advertising 300 

Maintenance  Arc  Lamps 1,500 

Licenses 1,000 

Discounts    34,000 

General   Expense    5,000 

Sundry    Debtors,    Gas 40,000 

Sundry  Debtors,  Merchandise 10,000 

Cash    29,000 

Bond  Interest 25,000 

Plant  1,055,600 

$1,390,600        $1,390,600 

The  inventory  of  manufacturing  material  is  $20,000. 

The  inventory  of  distribution  material  is  $4,000. 

No  other  inventories  of  any  description  are  car'-ted. 

The  amount  of  gas  manufactured  during  the  y^ar  was  300,000,000  cubic 
feet.  Amount  sold,  270,000,000  cubic  feet.  Unaccounted  for,  30,000,000  cubic 
feet. 

Give  first,  the  manufacturing  cost  of  gas  sold ;  second,  the  distribution 
cost  of  gas  sold ;  third,  prepare  statement  of  operations  of  the  company  and 
balance  sheet  of  assets  and  liabilities. 

PROBLEM  24 

(Michigan,  1909) 
A  bicycle  manufacturing  company  makes  up  its  account  December  31, 
1909,  for  the  year.     The  following  are  the  debits  to  the  Profit  and   Loss 
Account : 

Raw  Materials  on  Hand  January  1,  1909 $12,500 

Finished  Machines  on  Hand  Jan.  1,  1909;  1,600  Wheels  at  $30 48,000 

Purchases  of  Material 62,500 

Productive    Labor    _ 82,500 

Manufacturing    Expenses;    Coal,    Repairs,    Paint,    Varnish,    Super- 
intendent's   Salaries,    Unproductive    Labor,    and    Sundry    Ex- 
penses      23,000 

16 


Agents'  Commissions  90,000 

Branch  Expenses,  Rents,  Salaries,  and  Miscellaneous 40,000 

Selling    Expenses,    Travelers'    Salaries,    Discounts,    Rebates,    Mis- 
cellaneous    30,000 

Bad  Debts   8,000 

Depreciation   of   Machinery   and   Plant 5,500 

The  sales  for  the  year  were  6,000  wheels,  yielding  $540,000.  The  raw 
material  on  hand  December  31,  1909,  taken  at  cost,  was  $4,000,  and  the  finished 
wheels  in  stock  ready  for  sale  numbered  800. 

Prepare  an  account  from  the  above  showing  (a)  the  number  of  wheels 
manufactured ;  (b)  the  manufacturing  cost  per  wheel ;  (c)  gross  manufactur- 
ing profit;  (d)  the  final  net  profit  for  the  year,  including  in  the  net  profit  and 
loss  account  the  stock  of  finished  wheels  on  hand  December  31  at  their  cost 
as  shown  by  the  accounts. 


PROBLEM  25 

(Illinois,  1918) 

The  accounts  of  a  manufacturer  of  canned  goods  appears  thus  at  the 
close  of  the  fiscal  year: 

Factory    Overhead    Expense $  12,682.78 

Interest  on  Investment , 4,039.75 

Prime  Factory  Cost    (200,000  doz.) 164,954.92 

Legal  Expense   7,500.00 

.  Inventory  Finished  Goods  at  Close   (72,322  doz.) 64,800.00 

Bond   Interest    800.00 

Canned  Goods  Purchased  (2,000  doz.) 2,000.00 

Interest  (Debit) 432.50 

Brokerage   and    Commission    3,055.37 

Income   Taxes    (only)    1,573.89 

Inventory  Finished  Goods  at  Start  (20,000  doz.) 18,000.00 

Outward   Freight 2,125.00 

General  Expense 2,874.71 

Selling  Expense   436.48 

Sales    Allowances    1,124.00 

Sales   (149,678  doz.)    ? 

It  may  be  assumed  that  adjustments  of  inventory  and  accruals  have 
already  been  made,  except  when  the  contrary  is  clearly  inferred.  The  U.  S. 
Government  takes  25%  of  the  goods  manufactured,  at  cost  to  manufacturer 
plus  25  cents  per  dozen  with  the  further  stipulation  that  no  charge  shall  be 
included  for  selling  expense.  As  to  sales  to  regular  or  civilian  trade,  the 
Government  also  limits  the  manufacturer's  profit  on  goods  manufactured  this 
year,  to  25  cents  per  dozen.  Prepare  a  statement  of  the  items  which  go  to 
make  the  Cost,  Income,  and  Profit  on  each  of  these  two  classes  of  goods. 


PROBLEM  26 

(Virginia,  1916) 

The  books  of  a  corporation  with  capital  of  $100,000,  engaged  in  the  manu- 
facture of  foundry  castings,  show  after  inventory,  December  31,  1914,  materials 
and  finished  works  on  hand  as  follows : 

Pig  iron,  $5,500;  heavy  scrap  iron,  $300;  foundry  scrap,  $165;  coke,  $640; 
limestone,  $43  ;  other  materials,  $690;  finished  casting,  $250. 

Inventory  January  1,  1914,  as  foUoAvs :   Pig  iron,  $10,600;  heavy  scrap  iron, 

17 


$500;  foundry  scrap,  $150;  coke,  $954.50;  limestone,  $65;  other  materials, 
$1,140;  finished  castings  on  hand,  $1,075. 

Purchases  during  the  year  as  follows:  Pig  iron,  $125,600;  heavy  scrap 
iron,  $5,400;  foundry  scrap,  $125.60;  coke,  $16,000;  limestone,  $375;  other 
materials,  $7,325.     Cash  discount  on  purchases,  $1,340.60;  freight,  $750.34. 

The  sales  were  $250,000;  carriage  outwards,  $1,265.10;  discount  on  sales, 
$2,500;  other  expenditures,  such  as  taxes,  $325;  insurance,  $175;  labor, 
$53,250;  foundry  foreman,  $2,100;  office  salaries,  $2,500;  travelers'  salaries  and 
expenses,  $4,250;  repairs  and  upkeep  of  office,  $350. 

15%  depreciation  on  plant  valued  at  $50,000. 

Prepare  statement  showing  production  cost  and  year's  profit  from  oper- 
ation. 


PROBLEM  27 

(Louisiana,  1917) 

The  Mutual  Distilling  Co.  was  organized  on  June  1,  1916,  for  the  purpose 
of  manufacturing  alcohol  from  molasses.  It  started  operations  on  July  1, 
1916,  and  on  December  31,  1916,  the  Trial  Balance  of  the  General  Ledger 
was  as  follows : 

Real   Estate    $  10,000.00 

Buildings     97,000.00 

Machinery  and  Equipment   145,000.00 

Capital  Stock  $250,000.00 

Cash    5,700.00 

Accounts    Receivable    81,500.00 

Bills  Payable   105,000.00 

Accounts  Payable    15,183.00 

Alcohol  Sales    164,126.50 

Freight  (Outbound)    20,244.50 

Relun.'-  and  Allowances   2,875.00 

Molasses   89,124.00 

Repairs  and  Replacements   1,806.50 

Cooperage     32,186.00 

Superintendence    1,700.00 

Factory   Labor    6,766.00 

Fuel  and  Engine  Room  Supplies 5^964.00 

Factory   Supplies    5,742.50 

Brokerage  and  Commission   4,669.00 

Traveling    Expenses    1,032.00 

Other  Selling  Expenses    500.00 

Salaries  of  Officers   : 6,000.00 

Salaries   of  Clerks    1.800.00 

Stationery   and   Printing    350.00 

Insurance    5,500.00 

Taxes    1,000.00 

Incidental   Expenses    2,850.00 

Interest  and   Discount    5,000.00 

$534,309.50        $534,309.50 
During  the  six  months  the  company  produced  1,237,021  proof  gal- 
lons of  alcohol,  812,390  proof  gallons  were  sold,  and  424,631 

proof  gallons  remain  on  hand,  valued  at $44,458.00 

1,782,000  gallons  of  molasses  were  purchased,  1,682,000  were  used 

and  100,000  gallons  remain  on  hand,  valued  at 6,670.00 

Inventory  of  material  and  supplies  as  follows : 

Cooperage $  5,000.00 

Fuel    500.00 

Factory   Supplies    500.00 

18 


Prepaid  Insurance   1,500.00 

Unearned  Interest   700.00 

A  dividend  of  5%  on  the  Capital  Stock  was  declared  payable  in  January, 
1917;  all  accounts  receivable  are  considered  good. 

From  the  above  figures  prepare : 

1.  Closing  entries. 

2.  Manufacturing  and  trading  account  (from  inventory  of  manu- 

facturing product  and  raw  material). 

3.  Profit  and  Loss  Account. 

In  making  the  closing  entries  make  the  necessary  reserves  for 
depreciation  on  buildings  and  machinery  and  equipment  at 
such  rates  as  you  think  proper. 

4.  Trial  Balance  Sheet. 

5.  Return  of  Annual  Net  Income. 


PROBLEM  28 
(Pennsylvania,  1914) 

During  the  month  of  July  the  By-Product  Coke  Company  produces  60,000 
tons  of  coke  and  recovers  250,000  gallons  of  tar  sold  at  3  cents  per  gallon, 
700  tons  of  sulphate  of  ammonia  sold  at  $60  per  ton,  300,000,000  cubic  feet  of 
gas  sold  at  $100  per  million  cubic  feet,  and  3,200  tons  of  breeze  and  dust  sold 
at  50  cents  per  ton. 

The  raw  materials,  direct  labor  and  expenses,  as  well  as  sundry  operating 
and  general  works  expenses,  are  as  follows : 

Applicable  to  the  Production  of 
Sulphate 
of 
Coke  Tar  Ammonia  Gas 

Coal    $200,000.00 

Handling   Coal    2,000.00 

Lime   $  1,000.00 

Sulphuric  Acid 8,000.00 

Direct  Labor  15,000.00      $   800.00  2,000.00      $    750.00 

Steam,  Water,  Elec.  Lgt.,  etc.      3,000.00  500.00  1,000.00  600.00 

General  Yard  and  Switching. .       2,500.00  100.00 

Laboratory    1,200.00  300.00 

Operating    Coolers    and    Ex- 
hausters     150.00  450.00 

Operat'g  Tar  &  Liquor  Pump  300.00  200.00 

Miscellaneous  Supplies 1,200.00  20.00  200.00  150.00 

Repairs  and  Maintenance....       6,000.00  400.00  1,000.00  300.00 

Provision    for    Relining    and 

Renewals     1,200.00 

Provision    for    Depreciation..        1,500.00  300.00  500.00  600.00 

General  Works  Expenses....       4,000.00  100.00  600.00  150.00 

$237,600.00      $2,570.00      $14,900.00      $3,000.00 

Prepare  statements  showing  the  costs  of  making  coke,  tar,  sulphate  of 
ammonia,  and  gas,  also  show  these  costs  per  unit  of  production,  viz. : 
Per  ton  of  coke. 
Per  gallon  of  tar. 
Per  ton  of  sulphate  of  ammonia. 
Per  million  cubic  feet  of  gas.  • 

19 


PROBLEM  29 

(Adapted  from  Institute  Examination,  November,  1920) 

THE  NATIONAL  SHALE  BRICK  COMPANY,  INC. 

Trial  Balance— October  31,  1920. 

Allowances  on  Sales  $     1,500.00 

Accounts  Receivable  22,000.00 

Accounts   Payable    $  19,000.00 

Bonds— First  Mortgage,  6% 150,000.00 

Buildings: 

Tunnel  Kilns    150,000.00 

Periodic  Kilns   100,000.00 

Gas   Producer    50,000.00 

Dryer  Tunnels  10,000.00 

Mill— Pans  and  Machines   10,000.00 

Power   House    5,000.00 

Sheds  and  Stables   2,000.00 

Cash  in  Bank 2,000.00 

Capital— 1,000  Shares  at  $100.00  each 100,000.00 

Coal  on  Hand   1,200.00 

Discounts  on  Sales   4,500.00 

Gas  Coal  Used— Kiln  Firing 55,000.00 

Horses  and  Carts  1.000.00 

Inventory — Bricks,  November  1,   1919 5,711.75 

Interest  on  Bonds   6,750.00 

Insurance    2,500.00 

Labor: 

Quarry   12,000.00 

Pans  and  Machines  36,000.00 

Dryer    8,000.00 

Setting  27,000.00 

Kiln    Firing    65.000.00 

Unloading,  etc 30,000.00 

Power    7,000.00 

Materials  and  Supplies  Used: 

Pans  and  Machines  15,000.00 

O'Jarry   3,000.00 

l^ryers    •     1,500.00 

Setting    750.00 

Kiln  Firing  3,000.00 

Unloading  Kilns,  etc 4,000.00 

Power    5,000.00 

Machinery  and  Equipment: 

Pans  and  Machines   50,000.00 

Power   House    15,000.00 

Quarry    10,000.00 

Materials  and  Supplies  on  Hand 1,800.00 

Office  Supplies  and  Expense 2^500.00 

Prepaid  Taxes  600.00 

Payroll       ...             3,500.00 

Quarry  Rentals  Paid  in  Advance 7,500.00 

Sales— Brick         415,000.00 

Sales — Coke — Net    7  000.00 

Sales — Broken  and  Spoiled  Brick — Net 2^00000 

Salaries — Officers    10,000.00 

Salaries — Office   4|000.00 

Steam  Coal  Used: 

Drying    5,000.00 

Power    6,000.00 

Quarry    2,000.00 

Superintendence    10,000.00 

Taxes   3,000.00 

Reserve  for  Depreciation  25.000.00 

Unexpired   Insurance 750  00 

Surplus    ., 53,061.75 

$774,561.75        $774,561.75 
20 


The  foregoing  is  the  trial  balance  of  the  National  Shale  Brick  Company, 
Inc.,  manufacturers  of  shale  bricks.  The  operations  consist  of  (1)  blasting, 
<iiggings  and  conveying  the  shale  to  the  machines,  called  quarrying ;  (2)  grind- 
ing, mixing  and  mouldnig  the  wet  bricks,  called  pans  and  machines ;  (3 j  dry- 
ing; (4)  building  the  bricks  in  the  kiln  and  preparing  the  kiln  for  hring, 
called  setting;  (5)  burning  or  kiln  hring;  (6)  opening  the  kiln  and  unloading 
and  stocking  the  burnt  bricks,  called  unloading. 

The  kilns  are  equipped  with  gas  burners,  the  gas  being  produced  on  the 
premises.    Some  coke  is  obtained  from  the  gas  producer,  which  is  sold. 

The  production  reports  for  the  year  ended  October  31,  1920,  are: 

Wet  Bricks   Produced    18,000,000 

Good  and  Carried  to  Dryers 17,600,000 

Spoiled  in  Drying   850,000 

Spoiled  in  Burning   830,000 

Set  in  Kilns   16,000,000 

Bricks  sold  during  the  year  were  14,500,000. 

The  inventories  of  bricks  on  hand  November  1,  1919,  were  as  follows: 

Burned  Bricks  in  Yard 55,000@$16.25 $   893.75 

Burned  Bricks  in  Kilns 200,000(ai  14.75 2,950.00 

Bricks  Burning  in  Kilns 100,000@  10.20 1,020.00 

Green  Bricks  in  Kilns 80,000®     7.10 568.00 

Green  Brick  in   Dryers 50,000@     5.60 280.00 


$5,711.75 


The  candidate  is  required  to  calculate  the  number  of  bricks  on  hand 
October  31,  but  is  advised  that,  of  the  total  100,000  are  in  the  kiln  com- 
pletely burned,  250,000  are  in  process  of  burning,  100,000  green  bricks  are  in 
the  kiln.  Bricks  in  process  of  burning  and  drying  are  taken  as  averaging 
half  the  process.  Shale  and  wet  bircks  from  the  machine  are  used  as  produced 
and  no  inventory  is  taken  into  account. 

The  inventories  are  priced  at  cost.  In  the  case  of  burnt  bricks  overhead 
is  included ;  in  other  cases  it  is  excluded. 

The  shale  bed  is  rented,  rental  being  payable  at  the  end  of  each  year  on 
the  tonnage  used.  This  is  calculated  at  the  rate  of  3^/2  tons  per  thousand 
wet  brick,  and  the  rate  is  10  cents  per  ton.  The  agreement  provides  for  a 
minimum  rental  of  $4,000.00  per  annum.  In  case  the  quantity  of  shale  used 
is  not  sufficient  to  make  the  $4,000.00,  the  company  is  allowed  to  retain  the 
difference  out  of  subsequent  years  in  which  the  quantity  used  may  amount 
to  more  than  $4,000.00. 

Depreciation: 

■  Tunnel  Kilns  7^%  per  annum 

Periodic    Kilns    10     %  " 

Gas  Producer   10     %  " 

Dryer  Tunnels   7^  %  "         " 

Machinery  Equipment 10     %  "  " 

Other   Buildings    5     %  " 

Sheds  and  Stables  20     %  " 

Power  is  divided  10%  to  kiln  firing,  90%  to  pans  and  machines. 

Prepare  statements  showing  cost  of  manufacture,  cost  per  thousand  bricks 
for  each  operation,  profit  and  loss  account  and  balance  sheet. 

21 


PROBLEM  30 

(New  York,  1914) 

On  January  1,  1914,  the  Arlington  Company's  records  show  the  following 
conditions  of  its  accounts : 

Inventory  of  raw  materials,  $46,864.26;  accrued  factory  payroll  applied 
and  distributed,  $2,495.34;  goods  in  process  at  prime  cost,  $191,665.32;  the 
further  value  of  $24,111.51  tor  the  factory  overhead,  also  $36,224,76  to  cover 
superintendence ;  finished  goods  in  stock  show  a  total  cost  of  $64,968.03. 

During  the  period  from  January  1  to  December  31,  1914,  purchases  of  raw 
materials  amounted  to  $241,249.35;  factory  payrolls,  $377,381.70;  superin- 
tendence, $114,300;  factory  expenses,  including  wages  not  applied  to  cost 
accounts,  $74,538;  interest  paid  on  notes,  $3,600;  dividends  received,  $15,012. 

During  the  period  mentioned,  the  operations  in  the  factory  comprised : 
raw  materials  requisitioned  for  consumption,  $239,461.02;  wages  applied  and 
distributed  to  manufacturing  cost,  $360,751.20;  and  to  factory  expenses, 
$17,878.17,  included  in  the  sum  stated  in  the  paragraph  above. 

Ihere  were  also  forwarded  from  the  factory  to  the  warehouse,  finished 
goods  at  prime  cost,  covering  materials,  $235,627.74,  and  labor,  $355,001.25. 
1  he  cost  of  goods  sold  during  the  year  was  $755,849.70,  and  the  proceeds  from 
goods  sold,  $907,019.64. 

On  December  31,  1914,  the  goods  in  process  included,  in  addition  to  prime 
cost,  factory  overhead  amounting  to  $25,317.06,  and  superintendence,  $38,- 
035.98,  and  accrued  factory  payroll,  applied  and  distributed,  amounting  to 
$3,743.01. 

Show  the  cost  controlling  accounts  as  they  would  appear  in  the  general 
ledger,  their  operation,  and  the  resulting  net  profit. 


PROBLEM  31 
(Ohio,  1913) 

The  Ohio  Iron  Co.  operates,  for  the  manufacture  of  general  iron  work,  a 
factory  situated  at  a  distance  from  the  main  office.  All  shipments  are  made 
from  the  factory,  and  all  bills  for  sales  are  made  by  the  main  office. 

No  cost  accounts  have  been  kept  in  the  past  but  they  are  now  desirous 
of  installing  a  proper  cost  system,  including  factory,  work  in  process,  and 
stores,  ledgers  at  the  factory.  You  are  handed  the  following  trial  balance  of 
their  books  as  of  June  1,  1913,  the  beginning  of  their  fiscal  year,  as  a  basis  for 
opening  new  records : 

Cash    $  5,674.10 

Accounts  Receivable   48,736.54 

Bills  Receivable    8,940.76 

Machinery  at  Factory  25,780.94 

Small  Tools  and  Supplies 3,760.92 

Office  Buildings    5,000.00 

Factory  Buildings    46,978.60 

Finished  Goods  Inventory 25,760.74 

Partly  Finished  Goods  Inventory 16,987.56 

Raw  Materials  Inventory   12,879.25 

Factory  Petty  Cash  Fund  800.00 

Bills  Payable   $  12,760.00 

Vouchers  Payable    15,621.24 

Capital  Stock  150,000.00 

Surplus     22,918.17 

$201,299.41         $201,299.41 

22 


During-  the  month  of  June,  1913,  the  following  transactions  occurred : 

Factory  wages  paid,  $16,798.25,  Unclaimed  wages  amounted  to  $476.54, 
which  are  held  at  the  factory  until  called  for.  Of  the  total  amount  of  labor. 
$12,578.22  is  direct  labor  and  the  balance  indirect. 

Materials  purchased  and  received  for  use  in  factory  work  amounted  to 
$24,254.73 ;  requisitions  on  the  storekeeper  for  materials  used  in  manufacture 
amounted  to  $18,234.87 ;  requisitions  for  materials  used  in  repair  to  machinery, 
shafting,  etc.,  amounted  to  $756.26;  requisitions  for  small  tools  and  supplies 
amounted  to  $396.92. 

Special  jobs  completed  and  shipped,  cost  to  make,  $28,378.34;  stock  orders 
completed  amounted  to  $5,389.27 ;  sales  of  finished  goods  from  stock  amounted 
to  $7,342.53. 

Factory  expenses  for  insurance,  water  rents,  taxes,  etc.,  amounted  to 
$3,897.23 ;  depreciation  on  machinery  is  to  be  taken  care  of  by  setting  up  a 
reserve  at  the  rate  of  12%  per  annum. 

Show  an  abstract  of: 

(a)  Journal  entr}^  for  general  books  to  open  factory  ledger. 

(b)  An  abstract  of  all  factory  ledger  accounts  as  they  should  appear 
after  the  entries  for  June  have  been  made,  stating,  by  way  of  memo  under  the 
title  of  the  several  accounts,  how  they  are  supported  by  the  auxiliary  factory 
records  controlled  by  them. 

(c)  Trial  balance  of  factory  ledger  as  at  June  30,  1913. 

PROBLEM  32 

(Massachusetts,  1915) 

The  main  office  of  a  manufacturing  concern  keeps  the  general  books  of 
the  company  and  sells  the  finished  product  which  is  billed  to  it  by  the  factory 
at  cost.  The  cost  books  of  the  factory  show  the  following  facts  on  January 
1,  1914: 

Cash  fund  (imprest),  $500;  raw  materials  and  supplies,  $15,910.32;  work 
in  process,  $72,609.24;  finished  product,  $40,219.57.  A  portion  of  the  payroll 
distributed  but  not  yet  paid,  $3,553.42. 

During  the  year  1914  the  transactions  were  as  follows :  Purchase  of 
raw  materials,  $91,113.20;  wages  paid,  $143,273.49;  factory  expenses  charged, 
$103,699.16. 

The  raw  materials  and  supplies  used  amounted  to  $90,265.72 ;  the  factory 
expenses  distributed,  $103,834.43.  There  are  also  on  hand  unpaid  local  bills 
which  have  not  been  entered  on  the  books,  amounting  to  $135.27,  all  of  which 
were  for  factory  expenses. 

At  the  close  of  the  year,  December  31,  1914,  there  was  unpaid  and  un- 
distributed, the  factory  payroll  for  four  days,  amounting  to  $2,942.10  and 
also  550- hours  of  overtime,  payable  at  the  rate  of  time  and  one-quarter,  the 
regular  day  rate  being  35  cents  per  hour. 

The  finished  product  made  during  the  year,  figured  at  cost,  amounted  to 
$338,652.32 ;  the  amount  of  finished  product  transferred  to  the  main  ofiice  was 
$340,192.45. 

Write  up  all  the  ledger  accounts  on  the  factory  books  and  show  the  final 
trial  balance  of  December  31,  1914. 

PROBLEM  33 

The  United  Typothess  of  America,  the  national  master  printers'  associa- 
tion, is  advocating  the  installation  and  use  of  a  cost  accounting  system.    The 

23 


following  problem  is  based  upon  the  system  illustrated  in  the  Typothetae's 
Treatise  on  and  Demonstration  Book  of  the  Standard  Accounting  System  for 
Printers. 

(a)  You  are  asked  to  open  general  ledger  accounts  with  each  of  the 
accounts  given  in  the  trial  balance  on  January  1,  19.  .. 

The  exact  order  of  general  ledger  accounts  given  in  the  Demonstration 
Books  is  followed  below.  In  opening  the  ledger  accounts  allow  one-third 
page  for  each  account  listed  even  though  no  amount  appears  in  the  trial 
balance. 

Trial  Balance — ^January  1,  19. . 
Account 

No.         Name  of  Account 

1.  Cash    $3,680.00 

2.  Petty   Cash    200.00 

3.  Accounts   Receivable    8,250.00 

4.  Manufactured  Stock  3,800.00 

5.  Work  in  Process  (Factory  Accounts) 1,900.00 

6.  Paper  3,000.00 

7.  Ink    300.00 

8.  Bindery    Materials    900.00 

9.  Miscellaneous   Purchases   150.00 

10.  Insurance    260.00 

11.  Taxes .70.00 

12.  Machinery  and   Equipment    28,325.00 

13.  Accounts  Payable   $9,630.00 

14.  Wages  200.00 

15.  Capital  Stock   30,000.00 

16.  Surplus    9,000.00 

17.  Loss  and  Gain   205.00 

18.  Depreciation  Reserve  830.00 

19.  Bad  Debts  Reserve  130.00 

20.  Interest  Plant  Investment  0.00 

21.  Rent     0.00 

22.  Light   0.00 

23.  Power    0.00 

24.  Spoilage    0.00 

25.  Sales   Allowances    0.00 

26.  Reserve  for  Overhead  740.00 

27.  Discounts   0.00  0.00 

28.  Sales    0.00 

29.  Special  Sales   0.00 

30.  Trading   Account    0.00  0.00 

31.  Salaries   0.00 

32.  General  Expense   0.00 

33.  Office  Expense   0.00 

34.  Shipping  and  Deliveries   0.00 

35.  Advertising    _. 0.00 

36.  Selling  Charges   '. 0.00 

37.  SelHng   Expense    0.00 

$50,735.00  $50,735.00 
Reserve  for  Overhead  is  used  as  an  adjustment  account  and  "absorbs  the 
differences  between  the  set  up  cost  and  the  actual  cost  of  the  work  done." 
At  the  beginning  of  each  month  this  account  is  credited  with  not  less  than 
one  per  cent  of  the  department  sales  of  the  previous  month.  The  amounts 
to  be  debited  to  the  several  factory  accounts  are  indicated  in  Column  1 ;  the 
total  of  $108.92  should  be  credited  to  Reserve  for  Overhead. 

(b)  The  Factory  Ledger  serves  as  a  subsidiary  ledger  to  the  Work  in 
Process  Account.  The  following  balances  appear  in  the  factory  ledger 
accoimts  before  the  distribution,  adjustment  and  closing  entries  are  made  at 
the  end  of  the  month. 

You  are  asked  to  open  accounts  with  each  of  these  accounts  in  the  Factory 
Ledger. 

24 


Factory  Ledger  Accounts 

Paper  Direct $  112.42 

Ink  Direct    17.65 

Bindery  Materials  Direct   46.27 

Miscellaneous   Purchases   Direct    10.56 

Stock  Handling  Expense  14.12 

Hand    Composition    Department    852.10 

Machine   Composition   Department    143.20 

Job  Press  Department 94.78 

Small  Cylinder  Department   129.43 

Medium   Cylinder   Department    427.60 

Cutting  Machine  Department   18.69 

Machine  Folding  Department   6.13 

Bindery,  Small  Machines  Department  2.12 

Bindery,  Hand  Work  Department    24.93 

$1,900.00 
(c)  The  following  are  the  major  transactions  for  January. 
Account 
No. 

1.     The  Cash  Receipts  Total  $4,633.20 

Accounts  Receivable   4,637.95 

Discounts   Debit    4.75 

The  Cash  Disbursements  Total  6,651.36 

Accounts   Payable    1,672.28 

Wages    3,950.61 

Discounts    Credit    26.53 

Salaries,  Officers  and  Clerks 750.00 

Selling  Expense,  Salaries  and  Expenses   305.00 

3.     Sales  for  the  Month    $10,945.63 

Credit   with  $16.20  debiting   Account   No.   25. 
5.     Make  the  necessary  debits  and   credits   to  Work  in   Process 
whenever  entries  are  made  in  the  Factory  Ledger. 

Purchases  for  Month 

Account  No.    6 $954.10 

Account  No.    7 48.20 

Account  No.    8 122.50 

Account  No.    9 42.80 

Account  No.  10 36.25 

13.     Total   Purchases   on  Account  for  Month $2,301.26 

Debit  the  following  accounts  with  the  respective  amounts  which  are 
included  in  the  credit  to  Accounts  Payable : 

21.  Rent    $166.67 

22.  Light    58.26 

23.  Power    86.06 

32.  General   Expense    185.90 

33.  Office  Expense    35.12 

34.  Shipping  and  Deliveries    38.09 

35.  Advertising    75.00 

2)1.  Selling  Expense   5.00 

Debit  24,   (Spoilage)  and  credit  Special  Sales,  $17.27. 

General  Expense  (No.  32)  is  debited  with  the  sum  of  the  following  credits : 

19.  Bad  Debt  Reserve  $  40.00 

31.  Salaries    750.00 

Z2>.  Office  Expense    72.72 

34.  Shipping  and  Deliveries   176.80 

Included  among  the  credits  to  No.  13  (Accounts  Payable)  are  the  follow- 
ing items  which  should  be  charged  to  the  respective  accounts  in  the  factory 
ledger : 

General  Factory  Expense    $118.40 

Stock  Handling  Expense   22.12 

25 


Hand  Composition  Expense  38.11 

Machine  Composition  Expense   24.85 

Job  Press  Expense  58.05 

Small  Cylinder  Expense  21.44 

Medium  Cylinder  Expense 138.28 

Cutting  Machine  Expense   8.67 

Machine  Folding  Expense   2.21 

Bindery,   Small  Machines   Expense    3.99 

Bindery,  Hand  Work  Expense  11.19 

(d)  The  data  given  on  the  distribution  page  shows  how  the  various 
items  are  to  be  allocated  over  the  factory  accounts.  The  accounts  in  Columns 
1-7,  both  inclusive,  are  to  be  debited  to  the  several  factory  accounts  and  the 
totals  are  to  be  credited  to  the  accounts,  the  titles  of  which  are  used  as 
columnar  headings.  The  use  of  Columns  8,  9  and  10  are  explained  in  foot 
notes. 

The  following  supplementary  facts  should  be  used  in  closing  the  books 
for  the  month : 

Item  I.  Shipping  and  Deliveries  is  to  be  charged  with  wages  to  the 
amount  of  $125. 

II.  During  the  month  the  following  materials  were  requisitioned: 

Paper    $2,387.45 

Ink    40.29 

Bindery   Materials    95.46 

Miscellaneous  Purchases   92.14 

$2,615.34 

III.  Light  is  chargeable  to  the  following  accounts  to  the  amount  stated : 

Selling  Expense  $1.15 

Shipping  and  Deliveries   1.82 

Office   Expense    5.80 

$8.77 

IV.  The  "Fixed  Charges"  for  the  month  are  as  follows :  Credit  these 
accounts  in  general  ledger;  debit  factory  accounts  as  shown  on  distribution 
sheet. 

Rent    $166.67 

Insurance   43.43 

Taxes  12.21 

Depreciation    Reserve    278.96 

Interest,   Plant  Investment   162.88 

These  items  are  distributed  as  shown  in  Column  7  and  also  to : 

Selling  Expense  $  5.51 

Shipping  and  Deliveries   11.89 

Office  Expense  31.80 

V.  The  Sales  Register  shows  that  the  work  completed  during  the  month 
amounted  to  $9,097.91. 

VI.  "The  Selling  Expense  Account  is  charged  for  the  actual  expenses 
of  selling,  while  the  selling  charges  account  is  charged  for  the  amount  of 
these  actual  expenses  which  the  individual  jobs  absorb."  The  job  records 
show  that  Selling  Expense  charged  to  jobs  during  the  month  amounted  to 
$386.82. 

VII.  Advertising  is  to  be  closed  into  Selling  Expense;  Sales  Allowances 
into  Sales ;  Special  Sales,  Sales  and  the  Cost  of  Completed  Work  into  Trading. 

VIII.  Close  the  two  following  over-estimates  into  Reserve  for  Overhead : 
Medium  Cylinder  Department   $12.40 

Ink    Direct    18.70 

26 


IX.     Close  the  following  accounts  into  Loss  and  Gain  : 
Discounts. 
Selling  Charges. 
Selling  Expense. 
Trading. 
Interest,  Plant  Investment. 

Note :     If  desired,  the  student  may  make  the  journal  entries  necessary  to 
obtain  Statement  data.    The  ruling  of  the  journal  advocated  in  the  Standard 
Accounting  System  for  Printers  contains  the  following  columnar  headings 
(left  to  right)  : 
Debits: 

1.  Accounts   Receivable. 

2.  Accounts   Payable. 

3.  General  Ledger. 

4.  Factory  Accounts. 

5.  Folio. 
Account: 

6.  Description. 
Credits: 

7.  Factory  Accounts. 

8.  General  Ledger. 

9.  Accounts  Payable. 
10.     Accounts    Receivable. 

You  are  asked  to  close  the  ledgers  and  prepare : 

1.  A  statement  of  Factory  Operations,  showing  cost  of  completed  work, 
for  January. 

2.  The  Operatmg  (Income)  Statement  for  the  month  of  January. 

3.  The  Financial  Statement  of  the  business  on  January  31,  19. . 

DISTRIBUTION  OF  ITEMS,  FACTORY  ACCOUNTS 

1.              2.              3.           4.           S.             6.              7.             8.  9.             10. 

Reserve                                                                                               General  Reserve 

for          Wage       Light  PowerSpoilage  General     Fixed    Factory  Sales           for 

Overhead                                                             Expense  Charges  Expense  Overhead 

a.                                                                                      b.             c.  d.              e. 

Paper    Direct $  22.19   $2,380.03  $     8.01 

Ink    Direct 1.87   61.93    

Binderv  Materials  Direct.       2.03   104.41       28.25 

Misc.    Purchases    Direct..       4.85   96.99   

General  Factory  Expense $    350.00   

Stock   Handling   Expense.        7.01        280.00  $  4.10  $  1.65   $  57.50   372.78   

Hand   Composition   Dept..      19.53     1,107.85     12.80   $    371.45     160.98  $142.01     1,799.92     112.10 

Machine  Composition  Dept.       6.29        201.86       2.12       4.93   89.54       84.29       34.23        438.93       12.60 

Job   Press   Dept 11.76  402.63  3.80  10.83  $  4.10  147.31  43.94  56.32  736.89         2.19 

Small   Cylinder    Dept 3.34  87.33  2.22     14.90   44.68  32.81  17.08  231.44           .60 

Medium   Cylinder  Dept. .  .  14.02  920.84  14.50     38.40   342.28  103.71  130.83     1,739.08   

Cutting  Machine  Dept 2.16  132.00  1.70  7.86       8.10  52.05  26.56  19.90  257.29       14.98 

Machine    Folding    Dept...  1.94  37.65  3.20       5.12  1.17  22.79  31.57  8.71  113.23  4.25 
Bindery    Small    Machines 

Dept 2.01  79.96  .85       2.37   36.74  43.33  14.04  178.17  1.14 

Bindery  Hand  Work  Dept.  9.92  371.34       4.20   3.90  118.58  30.26  45.28  586.82  32.47 


Total  $108.92  $3,971.46  $49.49  $86.06  $17.27  $1,225.42  $614.95  $468.40  $9,097.91  $216.59 

a.  For  use  of  account  see  page  2. 

b.  See  Item  IV  in  problem. 

c.  Credit  General  Factory  Expense  in  Factory  Ledger. 

d.  The  amounts  in  this  column  (9)  are  to  be  credited  to  the  several  factory  accounts. 

e.  Under-estimates;  credit  these  accounts  in  Factory  Ledger. 


PROBLEM  34 

(Michigan,  1914) 

The  District  Machine  Company  operates  a  factory  cost  system  controlled 
by  a  double  entry  factory  ledger,  the  opening  balances  in  which  appear 
January  1,  1914,  in  part  as  follows : 

27 


Undistributed   Burden $  15,000 

Raw  Material    100,000 

Work  in  Process 250,000 

Finished    Product    98,000 

Accrued    Payroll    7,000 

The  following  represent  the  total  of  the  operations  for  given  period : 

Raw  Material   Purchased $225,000 

Payrolls    155,000 

Productive    Labor    Distribution 150,000 

Department  Overhead 315,000 

Raw  Material  Consumed 250,000 

Product  at  Cost 825,000 

Department  Overhead  Distributed 325,000 

Sales  at  Cost 905,000 

Raise  the  necessary  controlling  accounts  to  show  the  ledger  record  of 
the  above  operations,  together  with  trial  balance  at  the  end  of  the  period. 


PROBLEM  35 
(Ohio,  1918) 

The  Federal  Manufacturing  Company  commenced  business  on  January 
1,  1917,  with  paid  up  capital  of  $2,000,000,  It  has  a  system  of  cost  accounts 
which  are  controlled  by  the  general  books. 

The  Trial  Balance  of  the  company  at  December  31,  1917,  was  as  follows: 

Dr.  Cr. 

Cash    $     30,000 

Accounts  Receivable 130,000 

Notes  Receivable   25,000 

Raw  Materials  150,000 

Overhead  Burden 

Work  in  Process 100,000 

Finished  Goods 300,000 

Dividends  Paid   70,000 

Plant  and   Machinery 1,369,750 

Profit  and   Lx5ss $     23,250 

Interest  on  Plant  Investment 60,000 

Accounts  Payable 41,000 

Notes  Payable  500 

Reserve  for  Depreciation 50,000 

Capital  Stock  2,000,000 

$2,174,750        $2,174,750 

The  general  books  of  the  company  show  the  following  charges  and  credit 
to  Overhead  Account : 

Factory  Executive  Salaries  (one-third) $  15,000 

Indirect  Labor  30,000 

Cost   Department   Salaries 10,000 

Superintendents'  Salaries    10,000 

Repairs  of  Machinery  and  Buildings 25,000 

Power   5,000 

Factory  Supplies  and  Expenses 5,000 

Depreciation  of  Plant  and  Machinery 50,000 

Interest  on  Plant  and  Equipment 60,000 

Salesmen's  Salaries  20,000 

Salesmen's  Expenses   10,000 

Advertising    30,000 

Freight  Outbound  10,000 

Shipping  Department,  Labor  and  Expense 15,000 

Officers'  Salaries  (executive,  two-thirds) 30,000 

Office  Salaries   (Clerks) 15,000 

Office  Expenses  5,000 

Cash  Discount  on  Sales ISJOOO 

28 


Interest  on  Notes  Payable 10,000 

Allowances   to   Customers 10,000 

Bad  Debts 5,000 

$385,000 
Credits: 

Cash  Discounts  on  Purchases $  10,000 

Burden  applied  to  cost  orders  in  process  during  the  year   (equal 
to  100%  of  direct  labor) : $375,000 

On  making  an  examination  of  the  accounts,  you  find  that  the  purchase 
of  raw  material  during  the  year  amounted  to  $500,000 ;  that  the  cost  of  direct 
labor  was  $375,000 ;  and  that  the  sales  amounted  to  $723,250. 

An  analysis  of  the  orders  in  process  discloses  the  following  charges : 

Materials ;  .$25,000 

Direct  Labor 37,500 

Burden  (100%  direct  labor) 37,500 

$100,000 

The  number  of  units  completed  and  delivered  to  the  warehouse  was  100,000, 
and  of  this  number  70,000  units  were  sold. 

You  find  that  a  dividend  of  3^^o  was  declared  during  the  fiscal  year 
and  that  no  entry  was  made  on  the  books. 

You  are  asked  to  prepare  a  Balance  Sheet  and  a  Profit  and  Loss  State- 
ment; also  a  statement  showing  the  cost  and  net  profit  per  unit. 

Submit  your  working  sheet. 

PROBLEM  36 

(Wisconsin,  1919) 

The  A.  Mfg.  Co.  operates  a  cost  system  and  on  March  31,  1919,  the  fol- 
lowing balance  is  taken  from  their  ledger : 

Material  (Opening  Inventory) $  3,000.00 

Material  Purchases 8,084.32 

Labor  (Total  Payroll  During  Period) 5,692.28 

Accrued  Payroll— First  of  Period $       200.00 

Insurance  Unexpired 828.00 

Taxes    1,095.00 

Reserve  for  Depreciation 1,240.00 

Work  in  Process 2,000.00 

Finished  Goods  3,754.00 

Power 483.00 

Miscellaneous  Supplies  and  Expenses 985.85 

Sales  13,485.60 

Sales  Returns  865.20 

Sales  Allowances 50.00 

Outbound  Freight 120.00 

Selling  Expense    1,120.53 

General  Office  Expense 1,090.73 

Discount   on   Purchases 165.40 

Discount  on  Sales 95.00 

Reserve  for  Bad  Debts 125.00 

Accounts    Receivable     8,600.40 

Accounts  Payable 10,233.81 

Cash    11,585.50 

Land   4,000.00 

Buildings  12,000.00 

Machinery  and  Equipment 50,000.00 

Capital  Stock   100,000.00 

Unissued  Stock 15,000.00 

Surplus 5,000.00 

$130,449.81    $130,449.81 
29 


The  distribution  of  the  several  factory  expenses,  among  other  accounts, 
is  indicated  in  the  tabulation  on  the  following  page.  Vertical  totals  give  the 
credits  to  the  accounts  used  as  columnar  headings.  The  horizontal  totals 
give  the  debits  to  the  accounts  listed  at  the  left,  which  are  obviously  in  addi- 
tion to  those  given  in  the  trial  balance. 

CREDIT  TO  ACCOUNTS 

Miscellan- 
»  Reserve  General     eous 

Debits  to  Accounts            Labor    Building  Power    Insur-  Taxes        for      Repairs  Factory  Supplies  Totals 
Expense                  ance                   Depre-                 Expense      and 

ciation  Expense 

Building    Expense $    185.00   $  84.10  $12.00  $20.00  $  40.00  $  65.00   $102.50.$    508.60 

Power    300.00   8.00     10.00       40.00   358.00 

Repairs    356.40   2.00       2.50       13.33    215.00  589.23 

General   Factory   Expense.         92.60$  76.29 299.10  467.99 

Factory  Overhead  Dept.  A      246.50     101.72     252.30     12.00     15.00       75.00     159.00  $155.90     105.60  1,123.02 

Factory  Overhead  Dept.  B      251.20     127.15     336.40     16.00     20.00     100.00     247.80     207.79     125.40  1,431.74 

Factory  Overhead  Dept.  C      185.70     101.72     168.20       7.00       8.75       43.75     115.43     104.30       81.50  816.35 

Shipping    117.00       50.86  1.00       1.25         8.33         2.00   56.75  237.19 

General   Expense    (office) 50.86   14.00     16.75         8.33   89.94 


Totals     $1,734.40  $508.60  $841.00  $72.00  $94.25  $328.74  $589.23  $467.99  $985.85  $5,622.06 

You  are  asked  to  open  ledger  accounts  with  each  of  the  items  listed  above 
and  with  such  other  accounts  as  may  be  necessary  in  order  to  record: 

(a)  The  closing  entries  and  the  appropriate  revenue  accounts. 

(b)  The  operating  or  income  statement  for  the  month  of  March,  1919. 

(c)  The  financial  statement  or  balance  sheet  on  March  31,  1919. 

Notations 

Cost  of  Sales  Returns   $   597.12 

Inventories,  March  31,  1919: 

Material   4,600.00 

Work  in   Process 4,024.86 

Finished  Goods 7,635.72 

Accrued    Labor    686.79 

Factory  Overhead  Accounts  Credited  as  Follows: 

Department  A  1802  Hours  at  67c 1,207.34 

Department  B  2523  Hours  at  52c 1,311.96 

Department  C  4418  Hours  at  15c 662.70 

An  account  receivable  of  $64  from  goods  sold  in  December  is  considered 
lost ;  $125  should  be  reserved  for  bad  debt  losses  of  the  month. 

(d)  State  the  type  of  a  cost  accounting  system  which  the  above  problem 
illustrates. 


PROBLEM  37 

(Wisconsin,  1915) 

The  main  office  of  the  Black  Manufacturing  Company  is  located  in  Mil- 
waukee, but  the  factory  is  at  Waukesha.  The  cost  records  are  kept  at  the 
factory,  but  at  the  end  of  each  month  the  necessary  data  is  given  the  main 
office  so  that  the  proper  accounts  may  be  closed  into  the  Manufacturing  ac- 
count, compiled  on  the  general  books  as  a  section  of  the  general  revenue  ac- 
count.   Both  cost  and  general  books  are  kept  by  double  entry. 

The  following  accounts  having  to  do  with  manufacturing  appear  on  the 
general  books  of  the  Black  Manufacturing  Co.,  March  31,  1915,  before  closing 
entries  are  made : 

Inventory,  Jobs  in  Progress,  March  1 $  3,000.00 

Inventory,  Finished  Goods  (not  yet  shipped)   March  1 2,000.00 

Inventory,  Raw  Materials,  March  1 ^ 5,000.00 

Raw  Materials  Purchased  During  Month 10,000.00 

30 


Productive  Labor  5,000.00 

Rent    200.00 

Heat    50.00 

Light    25.00 

Power /  150.00 

Repairs  to  Machinery  150.00 

Sundry  Factory  SuppHes   25.00 

Superintendence    300.00 

Unproductive  Labor   150.00 

The  following  items  of  expense  should  also  be  considered  in  building  up 
the  accounts  on  the  general  books  for  the  month  : 

Taxes    (month's   share)    $       20.00 

Insurance  (month's  share)    15.00 

Depreciation  on  Plant  (month's  share)   300.00 

The  accrued  productive  labor  on  March  31,  amounts  to 1(X).00 

The  cost  records  show  the  following  data : 

Materials  Charged  to  Jobs  in  Progress,  During  Month $11,000.00 

Materials   Charged  to   Finished   Goods,   During  Month 9,000.00 

Labor  Charged  to  Jobs  in   Progress,   During  Month 5,100.00 

Labor  Charged  to  Finished  Goods,  During  Month 4,000.00 

Indirect  Expense  Charged  to  Jobs  in  Progress,  During  Month..     1,475.00 
Indirect  Expense  Charged  to  Finished  Goods,  IDuring  Month....      1,025.00 

Jobs  in  Progress,  Balance  March  1 3,000.00 

Finished  Goods,   Balance   March   1 2,000.00 

Manufacturing  Account,  Balance  March  1 5,000.00 

Sales,   Goods   Shipped   During  March 20,000.00 

Finished  Goods,  Balance  (goods  not  yet  shipped)   March  31 1,500.00 

(a)  Construct  the  accounts  as  they  would  appear  on  the  cost  ledger, 

(b)  Close  the  cost  ledger. 

(c)  Give  the  journal  entry  connecting  the  cost  and  the  general  books. 

(d)  Compile  the  Manufacturing  account  on  the  general  books,  showing 
as  the  balance  thereof  the  actual  cost  of  goods  sold  during  the  month. 

(e)  Reconcile  the  profits  as  shown  by  the  general  books,  with  those  shown 
by  the  cost  records. 

PROBLEM  38 

Assuming  that  a  cost  accounting  system  is  separate  and  distinct  from 
and  parallel  to  the  general  books,  prepare,  from  the  Operating  Statement 
given  below,  detailed  debits  and  credits  under  each  of  the  accounts  as  they 
would  appear  in : 

(a)  The  general  financial  ledger. 

(b)  The  cost  ledger. 

Operating  Statement 

The  A  Company,  for  the  fiscal  year,  June  1,  1915-May  31,  1916: 

Sales   $275,000.00 

Deduct,  Cost  of  Goods  Sold: 

Cost  of  Production,  Raw  Materials: 

Inventory,  June  1,  1915 $  10,000.00 

Purchases    140,000.00 

150,000.00 

Inventory,  May  31,  1916 15,000.00 

$135,000.00 

Labor: 

Paid  During  Year   50,000.00 

Accrued,  June  1,  1915 1,000.00 

49,000.00 

Accrued,  May  31,  1916 1,500.00 

50,500.00 

31 


Factory  Expense: 

Heat    1,200.00 

Light 400.00 

Power     2,200.00 

Repairs  to  Plant  2,000.00 

Superintendence    3,400.00 

Unproductive  Labor   1,000.00 

Taxes    400.00 

Insurance    180.00 

Depreciation  on  Plant 3,600.00 

Sundry  Factory  Supplies 600.00 

Share  of  Admin.  Expense 1,000.00 

15,980.00 

Total  Cost  of  Production 201,480.00 

Jobs  in  Progress,  June  1,  1915 14,520.00 

Jobs  in  Progress,  May  31,   1916 10,000.00 

4,520.00 

Cost  of  Goods  Completed  During  Year  206,000.00 

Finished  Goods  on  Hand  June  1,  1915..       4,000.00 
Finished  Goods  on  Hand  May  31,  1916. .       3,500.00 

500.00 

Cost  of  Goods  Sold  During  Year 206,500.00 

Gross  Trading  Profit   68,500.00 

Trading  Expenses    27,500.00 

Net  Operating  Profits    41,000.00 

Add:    Income   from    Investments    15,000.00 

Financial    Expenditures    10,000.00 

5,000.00 

Net   Profit  for  Year   $46,000.00 

Bnsed  on  the  burden  rate  given  the  factory,  the  amount  charged  for  bur- 
den to  jobs  in  progress  during  the  year  was  $16,500. 

(cj  Close  the  cost  ledger;  (d)  give  the  journal  entry  which  had  to  be 
sent  the  main  office  before  the  operating  statement  could  have  been  com- 
piled accurately;  (e)  reconcile  the  profits  as  shown  by  the  General  books 
with  those  shown  by  the  cost  records. 

PROBLEM  39 

The  X  Manufacturing  Company  operates  a  cost  accounting  system  sep- 
arate and  distinct  from  the  general  books,  but  at  the  end  of  the  month  the 
factory  gives  the  main  office  such  data  as  may  be  necessary  to  accurately 
compile  the  proper  revenue  account  on  the  general  books. 

The  following  accounts,  having  to  do  with  the  manufacturing,  appear  on 
the  general  books  of  the  X  Manufacturing  Company,  April  30,  1916,  before 
closing  entries  for  the  month  are  made : 

Inventory,  Jobs  in  Progress  April  1 $  7,000.00 

Taxes   (month's   share)    200.00 

Insurance    (month's   share)    90.00 

Inventory,  Finished  Goods  April  1 3,000.00 

Heat    650.00 

Light  150.00 

Power  1,000.00 

Inventory,  Raw  Materials  April  1  4,800.00 

Raw  Material  Purchases   70,200.00 

Accrued  Labor,  April  1 750.00 

Labor  Paid  During  Period 25,250.00 


S2 


Repairs  to  Plant  1,000.00 

Superintendence    1,700.00 

Unproductive    Labor    600.00 

Depreciation  on  Plant   (month's  share) 1,700.00 

Sundry  Factory  Supplies    350.00 

Share  of  Administrative  Expense  450.00 

The  cost  records  show  the  following  data : 

Materials  Charged  to  Jobs  in  Progress  During  Mo..  70,000.00 

Labor  Charged  to  Jobs  in  Progress  During  Month.  25,800.00 

Burden  Charged  to  Jobs  in  Progress  During  Month  7,500.00 

Jobs  in  Progress,  Inventory  April  1 $     7,000.00 

Jobs  in  Progress,  Inventory  April  30 5,000.00 

Finished  Goods,  Inventory  April  1 3,000.00  ' 

Finished  Goods,  Inventory  April  30 2,300.(K) 

Goods  Shipped  During  April 132,500.00 

(a)  Construct  the  accounts  as  they  would  appear  on  the  cost  ledger. 

(b)  Close  the  cost  ledger. 

(c)  Give  the  journal  entry  connecting  the  cost  and  general  books. 

(d)  Compile  the  Manufacturing  Account  on  the  general  books,  showing 
as  the  balance  thereof  the  actual  cost  of  goods  sold  during  the  month. 

(e)  Reconcile  the  profits  as  shown  by  the  General  Books  with  those 
shown  by  the  Cost  Records. 

(f)  Construct  the  Raw  Material  and  Labor  Accounts  as  they  would  :  - 
pear  in  the  general  ledger. 

PROBLEM  40 
(Pennsylvania,  1911) 

A  textile  mill,  employing  some  700  hands,  operates  five  departments,  w'..'.\ 
a  superintendent  or  head  foreman  in  each.  About  500  hands  are  paid  upon  a 
piecework  basis,  50  on  a  part  piecework  and  part  day  rate,  according  to  the 
duties  assigned  to  them  from  day  to  day ;  100  are  on  a  straight  day  rate  basis, 
while  the  remainder  are  paid  weekly  salaries  but  no  overtime.  Describe 
clearly  and  concisely  the  methods  you  would  recommend  for  assembling  and 
recording  the  data  entering  into  the  weekly  payroll.  Also  state  how  you 
would  have  the  payroll  prepared  and  the  wages,  as  shown  thereon,  paid  to  the 
hands,  having  in  view  both  economy  in  the  clerical  work  and  the  securing  of 
proper  safeguards  against  frauds. 


PROBLEM  41 
(Pennsylvania,  1917) 

As  a  result  of  extended  patent  litigation,  the  "A"  Manufacturing  Com- 
pany is  ordered  to  account  for  the  profit  on  the  sales  of  a  certain  class  of 
goods,  which  they  have  been  manufacturing.  In  reply  to  this  order,  they 
submit  a  statement  showing  a  very  small  profit  on  said  sales. 

You  are  called  upon  by  the  attorneys  for  the  complainant  and  are  advised 
that  other  manufacturing  plants  have  made  very  large  profits  on  this  same 
line  of  articles,  and  that  they  desire  to  verify  the  correctness  of  the  reports 
rendered.  You  visit  the  plant  of  the  infringer  and  find  that  a  very  large  num- 
ber of  different  articles  are  manufactured,  that  no  cost  system  is  in  opration, 
and  that  while  the  classification  of  sales  is  made  as  between  the  different 
groups  of  articles  manufactured,  that  no  separate  costs  appear  upon  the  face 
of  the  general  accounting  books.    You  are  also  told  by  the  company  that  in 

88 


view  of  the  fact  that  it  made  only  limited  total  profits  durmg  the  period  under 
review,  that  the  profit  on  the  articles  in  question  could  not  be  anything  like 
what  the  attorneys  for  the  complainant  said  should  be  the  case. 

State  just  what  steps  and  what  studies  you  would  make  and  what  books 
and  records  you  would  examine  to  determine  either  the  correctness  of  the 
reports  rendered,  or  the  actual  profits  obtained  from  the  articles  in  question, 
and  to  what  extent,  if  any,  you  would  tie  up  these  results  with  the  total 
results  of  the  plant  operations.     Submit  your  answer  in  report  form. 


PROBLEM  42 

(Missouri,  1915) 
The  Riverside  Manufacturing  Company  desires  to  prepare  monthly  finan- 
cial statements  on  sound  accounting  lines,  although  the  books  have  not  been 
kept  so  that  the  cost  of  the  product  may  readily  be  determined  therefrom. 
The  trial  balance  as  at  January  31  (one  month  since  the  previous  annual 
closing)  is  as  follows : 

Building   $  15,000.00 

Machinery,   Machine   Shop 40,000.00 

Machinery,  Carpenter  Shop    5,000.00 

Power  House  and  Equipment 10,000.00 

Cash    1,000.00 

Acounts  Receivable   10,000.00 

Accounts  Payable  $     5,000.00 

Sales   23,000.00 

Sales  of  Scrap  Borings  50.00 

Labor    6,850.00 

Repairs  and  Supplies 525.00 

Fuel   : . . .  250.00 

Materials  Purchased    25,000.00 

Salaries  and  Office  Expense 550.00 

Capital    75,000.00 

Surplus  (December  31) 11,125.00 

$114,175.00        $114,175.00 

The  factory  operates  a  machine  shop  covering  5,000  square  feet  and 
using  about  500  horsepower,  and  a  carpenter  shop  covering  3,000  square 
feet  and  using  about  125  horsepower.  Depreciation  at  6%  per  annum  on  all 
capital  assets  is  to  be  written  off.  An  inventory  at  January  31  discloses  the 
following : 

Raw    Materials    $6,500.00 

Goods  in  Process: 

Material  5,400.00 

Labor  of  Machinists 1,200.00 

Labor   of   Carpenters 300.00 

It  is  required  to  reconstruct  the  accounts  on  a  simple  plan  of  cost  account- 
ing, showing  the  operations  of  the  departments,  and  to  prepare  a  balance 
sheet  as  at  January  31. 

On  further  analysis  of  the  accounts  the  expenditure  for  labor  is  found  to 
cover  the  following: 

Machinists    $3,500.00 

Carpenters  2,500.00 

Machine  Shop  Foremen  and  Clerks 300.00 

Carpenter    Foreman    150.00 

Engineers    200.00 


Superintendent  150.00 

Watchman  50.00 

$6,850.00 
The  expenditure  for  Repairs  and  Supplies  covers: 

For  the  Machine  Shop   $275.00 

For  the   Carpenter  Shop , 150.00 

Building  Repairs   100.00 

$525.00 

PROBLEM  43 

(New  York,  1916) 

The  factory  of  an  automobile  company  assembles  its  cars  only  on  receipt 
of  orders  from  the  main  office.  A  summary  of  the  factory  operations  for  a 
certain  period  is  as  follows: 

Parts   Purchased   $  162,500.00 

Parts  Manufactured  (material  cost) .  562,500.00 

Productive  Labor  (125%  of  material) *  703,125.00 

Factory    Expense    .- 1,128,000.00 

Cost  of  Cars: 

Parts  Purchased,  Consumed ■ 137,500.00 

Parts  Manufactured   (material  cost) 187,500.(X) 

Productive  Labor  (145%  of  material) 471,250.00 

Factory  Expense  565,500.00 

Material  on  Hand,  Unmanufactured 500,000.00 

Prepare  a  technical  trial  balance  of  the  cost  ledger  and  an  inventory  of 
the  stock  room. 


PROBLEM  44 

(Ohio,  1919) 

The  American  Manufacturing  Company  commenced  business  on  January 
1,  1918,  with  a  paid  up  cash  capital  equal  to  the  sales  for  the  year  1918. 

The  net  profits  for  the  year  1918,  were  $26,100. 

Of  the  total  charges  to  manufacturing  during  the  year,  40%  was  for 
materials,  30%  for  productive  labor,  and  30%  for  manufacturing  expenses 
(including  5%  depreciation  on  plant  and  machinery,  amounting  to  $3,000). 

The  value  of  the  materials  used  was  80%  of  the  amount  purchased,  and 
90%  of  the  amount  purchased  was  paid  during  the  year. 

The  inventory  value  of  Finished  Goods  on  hand  at  December  31,  1918, 
was  10%  of  the  cost  of  finished  units  delivered  to  the  warehouse,  and  the 
Work  in  Process  at  that  date  was  equal  to  50%  of  the  cost  of  units  delivered 
to  the  warehouse. 

The  Selling  and  Administrative  Expenses  were  equal  to  20%  of  the 
Sales;  also  to  40%  of  the  cost  of  goods  sold.  Ninety  per  cent,  of  these 
expenses  were  paid  during  the  year  1918. 

Plant  and  Machiner)'^  purchased  during  the  year  were  paid  for  in  cash. 

All  labor  and  manufacturing  expenses  (exclusive  of  depreciation)  were 
paid  in  full  up  to  and  including  December  31,  1918. 

Of  the  total  sales  for  the  year,  80%  was  collected  and  1%  charged  off 
as  worthless. 

From  the  given  data  you  are  required  to  prepare  a  Balance  Sheet  and  a 
Profit  and  Loss  Statement,  showing  cost  of  goods  delivered  to  the  ware- 
house, cost  of  goods  sold,  and  net  profit  for  the  year. 

86 


Return  to  desk  from  which  borrowed. 


This  book  is  DUE  on 


the  last  date  stamped  below. 


NOV    3 


APR    19  1946 

4Dec*SbCK 


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llMar'57KK 
RECD  LDj 

t.I,21-100m-9.'47(A5702sl6)476 


VE  028 


^  4 


